Top Dividend Paying Stocks in India

We are taught to be grateful to the ones who lend their aid in our time of need. The idea has been ingrained in our minds that for every assistance, we should offer a “Thank You”, a “Treat’s on me today”, or an “I owe you one”. Today’s concept of dividend stocks revolves around this idea as well. Dividends are a kind of payment issued to shareholders from companies that earn profits. It is done in cash or stocks. So, dividend stocks are shares of a company that pays a part of its profits to the holders of said shares.

Let’s take an example to understand it better. Suppose you are a fruit vendor who invested a capital of ₹10,000 from your savings and borrowed ₹5,000 from friends/relatives. You earned good returns by selling fruits of the season in the recent quarter. To repay your acquaintances, you give them some fruits from your business occasionally (instead of paying back in cash). This class of shares that lets investors earn a part of the company's profit for owning its shares is what we call dividend stocks.

The relatives putting capital in your business become your shareholders, and they receive additional returns as per the business’s profits. The investors (relatives in this case) can earn back the capital they invested after selling these shares based on the value of the shares on the date of the sale. This way, they now own a little part of your business and will have the chance to sell these stocks whenever they feel would be advantageous to them.

Let’s see the top 5 dividend stocks and how they are a great option to help make your portfolio look green.

Top 5 Dividend Stocks in India

Along with dividend yield, there are many other aspects of comparing the dividend stocks of different companies, like a company’s financials, growth prospects and more. Based on the different parameters, here are the top five dividend stocks in India:

1. Coal India Ltd.

With a dividend yield of 10.49%, Coal India Limited is one of the best dividend stocks on this list. It is headquartered in Kolkata, West Bengal, and is owned by the Ministry of Coal, i.e. it’s a state-owned company. CIL is the largest coal producer in the world and is established in 8 different states in India.

With a sales growth of 10% and profit growth of 32% (for the past 5 years), Coal India Ltd. is a promising choice for investors who wish to diversify their portfolio. As is clear from the table below, CIL has been issuing dividends periodically making its dividend stability impressive. 

2. Hindustan Zinc Ltd.

Giving a dividend yield of 24.04%, Hindustan Zinc Limited is India’s only integrated Zinc-Lead-Silver producer. With a sales growth of 9% and profit growth of 4% (for the past 5 years), HZL has Vedanta Limited as its parent company. The Government of India owns a 29.5% stake alongside Vedanta Group with a 69.4% stake in the company.

HZL's business comprises lead-zinc mines, hydrometallurgical zinc smelters, lead smelters, pyro metallurgical lead-zinc smelters, as well as sulphuric acid and captive power plants in northwest India.

The dividend stability of Hindustan Zinc Ltd. is noteworthy as the company has issued interim dividends with a promising dividend amount reaching double-digit. Although HZL hasn’t issued any final dividends since after 2015, the regularity of interim dividends and special dividends in-between years gives investors a stable standing when it comes to choosing a dividend stock.

3. Vedanta Ltd.

Vedanta Limited enters this list with a dividend yield of 43.16%. A natural resources and technology conglomerate, Vedanta Ltd. is spread in India, South Africa, Liberia, and Namibia. The sales growth is 10% with a profit growth of 4% (for the past 5 years).

They are also the only nickel-producing company in India after acquiring Nicomet and are now planning to enter the semiconductors and glass display market. Vedanta Group forays into various sectors of resources concentrating on oil & gas, zinc-lead-silver, iron ore, steel, copper, etc.

In terms of dividend stability, Vedanta Ltd. has maintained a positive outlook by issuing dividends frequently. Interim dividends with double-digit dividend amounts have been issued for the past few years. The company’s issuance of dividends with a promising dividend amount makes it a must-have addition to this list.

4. Bhansali Engineering Polymers Ltd.

With a profit and sales growth of 6% each (for the past 5 years), Bhansali Engineering Polymers Limited gives a dividend yield of 12.91%. The company specialises in producing Acrylonitrile Butadiene Styrene (ABS). They have also collaborated with Nippon A&L Inc. (NAL), Japan, to expand in the business of Styrenics Resins, ASA Resins and their alloys.  

Bhansali Engineering Polymers Ltd. has maintained a streak of issuing dividends, interim, final, and special types regularly. In July, for FY23, they issued three different types of dividends. Their regularity makes this dividend stock a great add-on for investors’ portfolios.

5. IDFC Ltd.

Infrastructure Development Finance Company Limited, aka IDFC Ltd., is a finance company under the Financial Services Department of the Government of India. Recently merged with IDFC First Bank, IDFC Ltd. also contributes to the NBFC sector with investments in asset management. It has a dividend yield of 9.74%.

IDFC Ltd. mostly issued interim dividends over the past 3 years, with a special interim in 2023. Its recent merger with IDFC First Bank represents a positive growth prospect for the company.

The Bottom Line

Dividend stocks also work as a great investment option for those who wish to receive a certain amount every other month. This investment option can be your key to handling various expenses as well as saving for retirement plans. But, along with dividend yield, one must also look after the company’s financials, dividend stability, and growth prospects before investing.

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Insider by Finology and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.